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									                                      MEMORANDUM
                                          September 16, 2010


TO:              Management Agents – Supportive Housing MR Developments

FROM:            Donna McMillan

SUBJECT:         Procedures for Implementing the 2011 Operating Budgets – MR Developments


Budgeting should be done with the general intention of balancing 2011 operating expenses with the 2011
income. Some changes/clarifications were made to the budget package and the instructions.             The
changes/clarifications are typed in Comic Sans. As always, please read these budget
guidelines carefully.




The following documents will be posted separately on the MSHDA website for your use:

         Procedures for Implementing the 2011 Operating Budgets;
         Budget Form #450-MR template with variance flags; and
         Identity of Interest Disclosure Form


The following guidelines and procedures should be used in preparing your budget package submission:



BUDGET PACKAGE              For all developments whose budget period begins with January 1, the
DUE DATES:                  budget package due dates are listed below:

                            October 1 – Section 236;

                            November 1 – Section 8 developments and Other Program developments.



AGENT BUDGET
SUBMISSION
REQUIREMENTS:            The management agents must complete the following two items by the applicable
                         due dates:

                            1)    E-mail the Rent Schedule Spreadsheet to MSHDA. The s preadsheet
                                  mus t be e-mailed to: MSHDAassetmgt@michigan.gov.; and

                            2)    Submit hard copies of any required budget attachments and detailed
                                  explanations for the applicable line items per the 2011 Budget Guidelines.




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BUDGET TEMPLATE
(MSHDA #450-MR):     Complete the Excel budget template (#450-MR) for each of the developments you
                     manage by entering the following information:

                              The 2010 budget information;

                              The 12-month operating expenses. Calculate this expense by doing
                               the following calculation:

                               1.   Total the actual expenses for the most current twelve months
                                    (example: August 2009 through July 2010);

                               2.   Subtract the prior years’ payables (example: July 2009);

                               3.   Add the current year’s payables; i.e. July 2010.

                             Proposed 2011 income and expenses.

                          The template will automatically flag any column where there is a $2,000
                          and 20% variance between the proposed 2011 budgeted amounts and the
                          12-month expenses. Any flagged columns must include current contracts,
                          if applicable, with the detailed notes for the budget line item.



EXCESS INCOME:       HUD Notice H 04-13, ―Guidelines for Calculating and Retaining Section 236
                     Excess Income‖ is still the most current guideline from HUD. HUD approval
                     letters or the management agent’s request letter to HUD to retain excess income
                     for fiscal year 2010/11 must be submitted with the budget package. Owners
                     should submit their requests to retain excess income to the Local HUD
                     Field Office.


TAX & INSURANCE
 ANALYSES:           The Tax and Insurance Analyses have been sent to you under separate cover.
                     These amounts should be budgeted in Lines 7a and 7b unless you disagree with
                     the amounts. If you disagree with MSHDA’s projections, please submit the
                     following documents with your budget submission:

                             Documentation from the tax assessor confirming new tax escrow
                              amount; or
                             A copy of your most current insurance premium bill.

                   If MSHDA does not hold your insurance escrow, you must include the following
                   items with your budget package:

                         Property Insurance Policy/Binder/Certificate listing MSHDA as the
                          Mortgagee for the development; and Additional Insured for General Liability,
                          Umbrella, Auto (if applicable) and Workman’s Compensation; and

                         A letter from your insurance company stating that the development is fully
                          insured. The letter must also include the name of the development and the
                          premium amount.

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IDENTITY OF
INTEREST
DISCLOSURES:         Identity of Interest Disclosure forms and bids do not need to be submitted with
                    the 2011 budget submission unless:

                             There is a 20% change between the amounts budgeted in the 2011
                              budget and the previous year; or

                             There are new Identity of Interest vendors since the 2010 budget
                              submission.


                    The Authority will require new Identity of Interest Disclosure forms and bids every
                    five years (due again in 2012). Identity of Interest expenditures must be identified
                    and detailed in the applicable budget line items.


DETAILED
EXPLANATIONS:       Detailed notes, including mathematical computations and supportive documents
                    must be included for each line item of the budget. Additionally, please indicate
                    which line items include Identity of Interest vendor expenses.



MAIL HARD COPIES:   All hard copies of required budget packages MUST be sent to:

                    Ms. Susan Hengesbach
                    Michigan State Housing Development Authority
                    735 E. Michigan, 3rd Floor
                    P.O. Box 30044
                    Lansing, MI 48909



BUDGET PACKAGE
REQUIREMENTS:       Budget packages must include detailed notes and supportive documents as
                    outlined in EXHIBITS A-1, A-2, A-3 and EXHIBIT B.

BUDGET EXHIBITS:    The following exhibits are available for your use in preparing your budgets:

                    EXHIBIT A-1 - Budget Submission Schedule and Required Attachments--Section
                    236 Developments

                    EXHIBIT A-2 - Budget Submission Schedule and Required Attachments--Section
                    8 Developments

                    EXHIBIT A-3 – Budget Submission Schedule and Required Attachments—Other
                    Program Developments

                    EXHIBIT B - Instructions for Completing (MSHDA #450-MR)

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                           EXHIBIT C - Annual Budget Form (MSHDA #450-MR)

                           EXHIBIT D - Notice to Residents of Intention to Submit a Request to MSHDA for
                           Approval of an Increase in Maximum Permissible Rents (Sec. 236 only)

                           EXHIBIT E - Identity of Interest Disclosure form and Part 10 of Authority's
                           General Rules . Identity of Interest Disclosure forms must be submitted for
                           management agent companies, if applicable .

                           EXHIBIT F – Budget Worksheet - HUD 92547-A (Sec. 236 only)

                           EXHIBIT G - Owner Certification of Purchasing Practices and Reasonableness of
                           Expenses (Sec. 236 only)

                           EXHIBIT H–1, H-2 or H-3 - Rent Schedule




Due to the complexity of the budget process, MSHDA staff are instructed to return incomplete
and/or unacceptable budget packages.

If you have any questions, please contact your assigned Asset Manager (AM).




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                                                                                       EXHIBIT A-1




                            SECTION 236 DEVELOPMENTS
                           BUDGET SUBMISSION SCHEDULE




Prior to September 30                     Send the Notice to Residents of Intention to Submit a
                                          Request to MSHDA for Approval of an Increase in
                                          Maximum Permissible Rents (EXHIBIT D) to the residents.

                                          Post the notice (EXHIBIT D) in three conspicuous places.

By October 1                              Budget packages due to MSHDA.

         NOTE: Do not use Section 236 posting documents for MSHDA moderate units.


Between September 30 and                  The assigned AM will review resident comments and
October 30 but not earlier than           consider such when completing the final budget.
30 days from date of posting
to residents

Prior to November 1                       MSHDA will send a copy of the approved budget and Rent
                                          Schedule to Management Agent and HUD. HUD has the
                                          right to approve or disapprove the Rent Schedule within 30
                                          days.

Prior to December 1                       The Management Agent MUST notify residents of the
                                          MSHDA approved rent increase for a January 1
                                          implementation date consistent with the resident’s lease
                                          terms*

                                          *NOTE:    If HUD disapproves the rent increase, the
                                                    notification to residents must be withdrawn until
                                                    HUD approval is received.


January 1                                 The management agent will implement the approved rent
                                          increase and budget.




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        REQUIRED BUDGET ATTACHMENTS – Section 236 Developments

A complete budget package MUST include the following attachments:


      Budget Worksheet, HUD Form 92547-A, unaudited for the period January through July 2010 (EXHIBIT
       F).

      A copy of your Notice to Tenants of Intention to Submit a Request to MSHDA for Approval of an
       Increase in Maximum Permissible Rents (EXHIBIT D).

      Copies of all current service contracts for the development indicating amounts, if there is a $2,000
       and 20% variance between the proposed 2011 budget and the 12-month expenses. If the required
       contracts are not submitted with the budget package or the required contracts are obsolete,
       the budget package will be disapproved.

      The MSHDA Budget Form #450-MR – 9/10 (EXHIBIT C) endorsed by the owner or the management
       agent, supporting material.

      Proposed Rent Schedule (EXHIBIT H-1).

      Identity of Interest Disclosure (EXHIBIT E), if there are any new Identity of Interest Disclosure
       vendors since the 2010 budget submission including management agents -or- there is a 20%
       change between the amounts budgeted in 2011 and the amount budgeted in 2010.

      Owner Certification of Purchasing Practices and Reasonableness of Expenses (EXHIBIT G).

      A copy of HUD’s approval letter or the management agent’s request letter to retain excess income for
       2010/11, if applicable.

      Resident comments.

      Copy of the most recent Excess Income Report.

      Evidence of Authority approval of pension plans for on-site staff, if the Authority does not have a record
       of the approval (see attached list).

      Tax/Insurance verifications, if required.

      Detailed notes, including mathematical computations and supportive documents for each line item of
       the proposed budget. Indicate the lines items that include Identity of Interest vendor costs.

      Letter from owner, if there is a budget deficit. This letter must describe a plan to fund the budget
       deficit.




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                                                                                                  EXHIBIT A-2

                                SECTION 8 DEVELOPMENTS
                              BUDGET SUBMISSION SCHEDULE


By November 1                                      Budget packages are due to MSHDA. There are no
                                                   resident posting or comment requirements.


November 1 and                                     The assigned AM will review and finalize the budget.
November 30


Prior to December 1                                MSHDA will send a copy of the approved budget to the
                                                   Management Agent.

January 1                                          The management agent will implement the approved
                                                   budget.


            REQUIRED BUDGET ATTACHMENTS – Section 8 Developments

A complete budget package MUST include the following attachments:

      Copies of all current service contracts for the development indicating amounts, if there is a $2,000
       and 20% variance between the proposed 2011 budget and the 12-month expenses. If the required
       contracts are not submitted with the budget package or the required contracts are obsolete,
       the budget package will be disapproved.

      The MSHDA Budget Form #450-MR – 9/10 (EXHIBIT C) endorsed by the owner or the management
       agent, supporting material.

      Copy of the most recently MSHDA-approved Rent Schedule (EXHIBIT H-2). The
       Rent Schedule includes a column for unit type, i.e. AW – Apartment Walk-Up; SD – Semi-Detached;
       TH-Townhouse; EFF-Efficiency.

      Identity of Interest Disclosure (EXHIBIT E), if there are any new Identity of Interest Disclosure vendors
       since the 2010 budget submission including management agents -or- there is a 20% change
       between the amounts budgeted in 2011 and the amount budgeted in 2010.

      Evidence of Authority approval of pension plans for on-site staff, if the Authority does not have a record
       of the approval (see attached list).

      Tax/Insurance verifications, if required.

      Detailed notes, including mathematical computations and supportive documents for line item of the
       proposed budget. Indicate the line items that include Identity of Interest vendor costs.

      Letter from owner, if there is a budget deficit. This letter must describe a plan to fund the budget
       deficit.




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                                                                                                   EXHIBIT A-3

    ALL PROGRAMS EXCEPT SECTION 8 AND SECTION 236 DEVELOPMENTS
                   BUDGET SUBMISSION SCHEDULE


By November 1                                       Budget packages due to MSHDA. There are no resident
                                                    posting or comment requirements.

Between November 1 and                              The AM will review and finalize the budget.
November 30

Prior to December 1                                 MSHDA will send a copy of the approved Rent Schedule
                                                    and budget to the Management Agent.

January 1                                           Implement approved budget.

NOTE: Rents for regulated and Low Income Housing Tax Credit units cannot exceed the amounts
      stipulated in the Regulatory Agreements or Section 42(g)(2)(c) of the Internal Revenue Code
      of 1986, as amended.




                              REQUIRED BUDGET ATTACHMENTS

A complete budget package MUST include the following attachments:

   Copies of all current service contracts for the development indicating amounts, if there is a $2,000 and
    20% variance between the proposed 2011 budget and the 12-month expenses. If the required contracts
    are not submitted with the budget package or the required contracts are obsolete, the budget
    package will be disapproved.

   The MSHDA Budget Form #450-MR – 9/10 (EXHIBIT C) endorsed by the owner or the management agent,
    supporting material.

   Proposed Rent Schedule (EXHIBIT H-3).

   Identity of Interest Disclosure (EXHIBIT E), if there are any new Identity of Interest Disclosure vendors
    since the 2010 budget submission including management agents -or- there is a 20% change between
    the amounts budgeted in 2011 and the amount budgeted in 2010.

   Evidence of Authority approval of pension plans for on-site staff, if the Authority does not have a record of
    the approval (see attached list).

   Tax/Insurance verifications, if required.

   Detailed notes, including mathematical computations and supportive documents for each line item of the
    proposed budget. Indicate the line items that include Identity of Interest vendor costs.

   Letter from owner, if there is a budget deficit. This letter must describe a plan to fund the budget deficit.




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                                                                                                  EXHIBIT B

                              INSTRUCTIONS FOR COMPLETING
                                   MSHDA FORM #450-MR


These instructions are offered as a guide to your staff for preparing the 2011 Annual Operating Budgets.

       IT IS VERY IMPORTANT THAT DETAILED NOTES, INCLUDING MATHMEMATICAL
        COMPUTATIONS AND SUPPORTIVE DOCUMENTS BE INCLUDED FOR EACH LINE ITEM OF
        THE BUDGET.

       2011 CONTRACTS MUST BE INCLUDED IF THERE IS A $2,000 AND 20% VARIANCE BETWEEN
        THE PROPOSED 2011 BUDGET AND THE 12-MONTH EXPENSES.


Budgets must be prepared by the management agent and submitted to the Authority on MSHDA Form #450-
MR utilizing the instructions outlined below:


COLUMN 1 - 2010 BUDGET: Use the 2010 Annual Operating Budget numbers as approved by the Authority.

COLUMN 2 - PREVIOUS 12 MONTHS EXPENDITURES: Calculate expenditures using the most recent 12
months actual expenditures (less prior year payables). Adjust your calculations for unusual expenditures
incurred during the previous 12 months or anticipated for the 2011 budget year.

COLUMN 3 - PROPOSED 2011 BUDGET: Estimate the anticipated 2011 income and expenses.

COLUMN 4 - VARIANCES OF GREATER THAN 20%: No input required.

COLUMN 5 – VARIANCES OF GREATER THAN $2,000: No input required.

COLUMN 6 – VARIANCE REQUIRES DETAIL: No input required.




                                           EXPENDITURES

Management agents may use their discretion to classify and record expenses as either routine maintenance
expenses (non-depreciable) or capital expenditures (depreciable). The method of depreciation and rationale for
classifications must follow standard accounting principles and practices. However, once an item is
classified as either non-depreciable or depreciable, it must be reported as such. Changing
accounting methods and practices within an established fiscal period or periods is not allowed
without formal declaration as required by IRS regulations.

       Non-depreciable operating and maintenance items must be budgeted in Lines 4g, 6d and 6f
        of the budget.

       Depreciable items or capital expenditures must be budgeted in Line 6e of the budget.




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LINE 4a       MANAGEMENT/ADMINISTRATION FEES – Include the salary of the program director or
administrator, bookkeeping, secretarial assistance, administrat ive fees and miscellaneous fees paid to a
management agent.


LINE 4b      EMPLOYEE PAYROLL - Include the gross salaries of all full and part-time staff including resident
managers and housekeeping, food preparation, program aides, transportation, maintenance and janitorial staff.
Include the employees’ names, position description, number of hours, hourly rate and salary.


LINE 4c   EMPLOYER PAYROLL TAXES - Include the employer’s portion of FICA, FUTA and
Unemployment Agency payments for all employees of the home/development. Also include the cost of an
unemployment tax audit.


LINE 4d     EMPLOYEE BENEFITS AND INSURANCE - Include the cost of the employer's contribution for
Authority-approved pension plans for on-site staff; health care; life insurance; workers’ compensation (if not
included with the property insurance premium); fidelity bond coverage when allowed under the Authority’s
employee dishonesty/crime policy; vehicle and any other Authority-approved insurance costs not currently
being escrowed.

NOTE:     The cost of Workers’ Compensation is determined by multiplying the percentage cost of
          workers’ compensation (supplied by The Unemployment Agency) by the gross salary of
          each employee or employee group. This percentage varies depending on the job
          classification of the employee.

NOTE:     Evidence of Authority approval of employee pension plans must be submitted with the
          budget, if the Authority does not have a record of the approval (see attached list).



LINE 4e       LEGAL – Include the cost of professional services relating to the development's operations; i.e.
serving notices, bonding, eviction proceedings, real estate tax appeals, etc.

NOTE:       Any legal expenses incurred in the sale or the proposed sale of the development or the
            partnership interest cannot be pa id from development operations.

NOTE:     Offset the amount of court costs or legal fees expected to be collected from residents.

Supportive documents should clearly establish the average number of cases expected during the forthcoming
year. Exclude the cost of unusually high expenses associated with nonrecurring lawsuits experienced in the
past.


LINE 4f       AUDIT FEES –Include the cost of preparing the annual certified audit. The audit expense cannot
exceed $11,000. Any charge in excess of this amount is a cost to the development’s owner.

The cost of the Annual Certified Audit’s legal opinion letter must be included in this line item.




9/10                                               10
LINE 4g       OFFICE/TELEPHONE - Include the cost of office supplies, computer maintenance and non-
capitalized office equipment, development-specific computer software, local and long distance telephone
charges, telephone equipment rental and internet charges. Development -related pager and cellular telephone
charges made by on-site staff are eligible expenses.


LINE 4h      MISCELLANEOUS ADMINISTRATIVE - Include the cost of newsletters, coffee, bank charges,
approved seminars or training sessions for on-site employees, charitable contributions, mileage for on-site staff
and other miscellaneous administrative costs.




UTILITIES
Please note: Public Act 295 of 2008 was signed into law on October 6, 2008 by Governor Jennifer
Granholm. The Act promotes the development of clean and rene wable energy and energy
optimization through the implementation of standards that will cost-effectively provide greater
energy security and diversify the energy resources used to meet consumers’ needs, encourage
private investment in renewable energy and e nergy efficiency and improve air quality. Michigan
Public Service Commission Temporary Order U-15800 was approved on December 4, 2008, as
required by MCL 460.1191. Case No. U-15800 outlined formats of renewable energy and optimization
plans and guidelines for requests for proposals for gas and electric suppliers subject to filing plans.
This Order will be in effect for no more than one year. (After that time, the Commission w ill
commence a rulemaking proceeding soliciting comments and suggestions regarding the content of
administrative rules in Case No. U-15900.)

This act has mandated renewable energy and energy optimization plans that required several rate
and fee adjustments. Some attached fees are best estimates. Further clarifications and publications
may alter the above noted rates.


Utility costs should take into account whether energy conservation measures will be undertaken to reduce
utility expense. If irrigation systems are planned for next year, water costs will no doubt need to be increased.


For developments not lying under the jurisdiction of one of these major companies, the individual utility offices
should be contacted and inquiries made regarding rate projections. Data should be included in the submitted
budget.




9/10                                               11
*LINE 5a     ELECTRICITY (Development-Paid Utilities & Common Areas)

                  ELECTRIC RATE PROJECTED PERCENT INCREASES FOR              2011


                                           General Service     Customer Service
                                              Rate             Charge/Month             Class

Consumers Energy Company                   .1442/kwh             $19.68                  B-1
Detroit Edison                              .1294/kwh            $12.81                  D3
American Electric Power:
       St. Joseph Service Area (MGS**)      .1047/kwh            $13.20                  Medium
                                                                                         General
                                                                                         Serv.(secondary)
  Three Rivers Service Area (MGS**)          .1008/kwh           $13.37                  Medium
                                                                                         General
                                                                                         Serv.(secondary)
Upper Peninsula Power Co.                    .1833/kwh           $15.00                  C-1
Upper Peninsula-Iron River                   .1516/kwh           $14.00                  C-2
Colverland (Edison Sault)                    .1131/kwh           $10.80                  G-1
Lansing Board of Water & Light               .0933/kwh           $28.06                  No.3


*The rates stated are estimates made by MSHDA staff using the best information available and are to
 be used to estimate utility costs. They do not represent an official statement regarding utility rate
 increases under consideration by the Public Service Commission.

** Medium General Service – Demand



LINE 5b      WATER & SEWER - Increase the actual water and sewer costs for the previous 12 months by
the estimated rate increase provided by the local water department.


*LINE 5c     FUEL (Development-Paid Utilities & Common Areas)

                     GAS RATE PROJECTED PERCENT INCREASES FOR             2011
                                      COMMERCIAL

                                         Commodity           Charge/Month        Class

Consumers Energy Company                 .9595/CCF             $10.50            Multi-Dwell A-1
Michigan Consolidated Gas                .9602/CCF             $25.00            2A Class II
SEMCO Energy Gas (excluding
  Battle Creek)                          .7949/CCF             $12.41            GS-I

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SEMCO-Battle Creek                          .8276/CCF                  $20.41             GS-I
WPS Michigan-Michigan Gas
 Utilities Corp.                            .8397/CCF                  $33.00             RMF-CII
Citizens Gas Company                        .8190/CCF                  $20.00             GS-B


*The rates stated are estimates made by MSHDA staff using the best information available and are to
 be used to estimate utility costs. They do not represent an official statement regarding utility rate
 increases under consideration by the Public Service Commission.



LINE 6a       FOOD - Include the cost of preparation and purchase of food for the residents.

LINE 6b       SUPPLIES & MATERIALS – Include the cost of non-food supplies for the operation of the home;
i.e. paper products, soap products, cleaning supplies, light bulbs, magazine or newspaper subscriptions and
teaching supplies.

LINE 6c      TRANSPORTATION - Include the costs of transportation of residents to and from any activity and
the cost of service, operation, payments and insurance, if the vehicle insurance is not escrowed with
MSHDA.

LINE 6d       NON-CAPITALIZED MAINTENANCE & REPAIRS – Include non-capitalized costs related to
purchased labor costs for regular maintenance of floors, carpets, windows, draperies, walls, lawns and
buildings; replacement costs for electrical, plumbing and janitorial services; materials and purchased labor
costs for minor structural repairs to walls, doors, floors, roofing, windows, screens, minor alterations, masonry,
plastering and other routine maintenance such as fixing locks, deadbolts, painting electrical and equipment
repairs.

Also include the costs of the following:

              PAINTING UNITS - Cost of unit turnover and cycle contracted painting, non-capitalized wall
              papering, painting supplies, wallpaper and paint removing material, etc.

              CLEANING UNITS - Cost of contractual vacated unit cleaning (not janitorial staff).

              HEATING AND AIR CONDITIONING – Costs of unit or common area boiler inspections and non-
              capitalized replacements and repairs or service contracts for heating and air conditioning
              equipment.

              PLUMBING – Cost of unit or common area maintenance contracts for plumbing, routine plumbing
              maintenance supplies, non-capitalized replacements or repairs and any scheduled payments for
              calling in a plumber.

              ELECTRICAL – Cost of unit or common area maintenance contracts for electrical repairs, non-
              capitalized interior lighting replacements or repairs, routine electrical maintenance supplies, and
              any scheduled payments for calling in an electrician.

              POOL MAINTENANCE – Cost of maintenance contracts for pool repairs, non-capitalized routine
              pool maintenance equipment and supplies.

              ELEVATOR – Cost of maintenance contracts for elevator repairs and non-capitalized routine
              elevator maintenance supplies.

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              EXTERIOR CYCLE PAINTING/WATERPROOFING – Cost of anticipated non-capitalized exterior
              cycle painting and waterproofing for this budget year.

              COMMON AREA COSTS – Cost of non-capitalized common area repairs, painting, renovation,
              cleaning or replacement.


LINE 6e       MAJOR PURCHASES/IMPROVEMENTS

              BUILDING AND LAND IMPROVEMENTS - Include the cost of capitalized improvements directly
              related to or added to the land, and capitalized major structural repairs or additions; i.e.
              sidewalks, roads, fences, landscaping shrubs, trees, lawn sprinkler systems, playground
              equipment, decks, awnings, siding, roofs, doors, windows, storage sheds, lighting systems,
              heating/cooling systems, security systems and equipment, etc.
              MAINTENANCE AND OFFICE EQUIPMENT - Include the cost of capitalized items; i.e. trucks,
              snow removal equipment, lawn mowers, power tools, desks, files, computers, development -
              specific computer software, typewriters, copiers, calculators, communication system equipment,
              etc.

              FURNITURE & FIXTURES - Include the cost of capitalized non-structural components of a
              building; i.e. appliances, floor covering, tubs, sinks, toilets, air conditioning units, water heaters,
              window treatments, common area furniture and pictures, etc.

              OTHER - Include the cost of capitalized items not reflected in the above categories; i.e. vans, etc.

LINE 6f      OTHER – Include the cost of non-capitalized security-related items; i.e. fire extinguishers, smoke
detectors, monitoring charges; uniforms; city inspection fees and permits; miscellaneous operating expenses;
and non-capitalized exterior costs.

LINE 7a      REAL ESTATE TAX ESCROW - You MUST use the ―Forecast Due‖ amount on the MSHDA tax
analysis unless you successfully appealed your taxes or obtained a tax abatement. If you disagree with
MSHDA’s projection, please submit the following with the budget package:

         Documentation from the tax assessor confirming the new amount.


LINE 7b    PROPERTY & LIABILITY INSURANCE -You MUST use the ―Forecast Due‖ amount on the
MSHDA insurance analysis unless ―shopping‖ insurance companies reduces the cost . If you disagree with
MSHDA’s projection, please submit the following with the budget package:

         A copy of your most current insurance premium bill.


If MSHDA does not hold your insurance escrow, you must include the following items with your budget
package:

         Property Insurance Policy/Binder/Certificate listing MSHDA as the Mortgagee for the development;
          and Additional Insured for General Liability, Umbrella, Auto (if applicable) and Workman’s
          Compensation; and

         A letter from your insurance company stating that the development is fully insured. The letter must
          also include the name of the development and the premium amount.


NOTE:         Include vehicle insurance costs in this line item, if the premium payment is escrowed
9/10                                          14
             with MSHDA.

LINE 7c     REPLACEMENT RESERVE – Replacement Reserve funding must be budgeted according to the
Regulatory Agreement.

Section 236 developments approved to retain excess income to increase Replacement Reserve
deposits must budget the amount in this line item.
LINE 7d    OTHER ESCROWS – Include payments for special MSHDA-held reserve accounts; i.e. exterior
painting/staining, asphalt, etc. Also include the same amount shown on LINE 2i, if the owner did not request
or receive HUD approval to retain excess income. If the owner has received HUD approval to retain excess
income, record the expenses in the appropriate expense line item(s). Separate and identify the amount of
excess income in this line item.

LINE 7e     MORTGAGE PRINCIPAL – Include the cost of the annual mortgage principal payments. Section
236 developments should use the amortization schedule.

LINE 7f     MORTGAGE INTEREST – Include the cost of the annual mortgage interest payments. Section
236 developments should use the amortization schedule.

LINE 8       TOTAL EXPENDITURES - Add LINES 4a through 7f.

LINE 9       INCOME MINUS EXPENDITURES - Subtract LINE 8 from LINE 3.




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                                                 INCOME

Once the total expense is determined, the income necessary to offset expenses can be calculated. Several
questions should be considered in determining the rents:

1.       Can the rental market absorb a rental increase? How much?

2.       Will the vacancy loss increase or decrease? What is the past trend?

3.       What is the income level of people on the waiting list?

4.       Have the rents historically been kept substantially lower than comparable housing? Why should the
         trend continue?

5.       What is the current financial condition of the development?

6.       Where would you like the development to be financially at the end of the budget year?

7.       Have you budgeted long-term escrows such as painting reserves?

8.       Have you budgeted repairs as required by the MSHDA Annual Physical Inspection?

9.       Can the development rely on reserves such as DCE Principal, Interest, and Replacement Reserves?

10.      Have you adequately informed the owner and sought their input on the tough decisions?




LINE 1        GROSS RENT POTENTIAL

     SECTION 236 RENT POTENTIAL INCLUDING SECTION 236 DECOUPLED DEVELOPMENTS

Multiply the proposed 2011 basic rent, times the number of units, times 12 months to determine annual rental
income. Also include moderate unit rents in rent potential. Use this information to complete the required
rent schedule.

The agent must provide detailed calculations. Failure to clearly show how rental income is derived
constitutes an unacceptable budget package.

Market Rate Rents (not to be confused with moderate rate rents) must be calculated as follows:

(New basic rent x Total number of each unit type x 12)
+ The annual interest reduction amount       = Market rent ratio*
divided by total annual – 236 basic rent potential


*Carry the market rent ratio calculation out four places past the decimal (.0000). The multiply the market rent
ratio by each basic rent to establish the market rent for each unit. (Round up at 50¢ and down at 49¢).

NOTE:         Do not use the market rate rents when calculating gross rental income. Only basic rent is
              used.



9/10                                              16
                                        SECTION 8 RENT POTENTIAL

Multiply the current contract rent, times the number of units, times 12 months to determine annual rental
income (Lines 1a and 1b). Include moderate unit rents in the annual rental income, if applicable. Use this
information to complete the required rent schedule.


         RENT POTENTIAL FOR ALL PROGRAMS EXCEPT SECTION 236 AND SECTION 8

Multiply the proposed 2011 rents, times the number of units, times 12 months to determine annual rental
income.

         Reduce this amount for rent increases that occur after January 1;

                                                                               Also
          Adjust this amount for rent revenue loss due to existing lease rent restrictions (lease variances).
          record the differences from the highest rent being paid for each unit type
          and any resident who is paying less for the unit type.

          The calculation of the lease variances must be included in the budget notes, including a unit -by-unit
          breakdown of the amount of the lease variance; and

         Do not include subsidy grants that support the operation of the development. Only resident-based
          subsidies should be included in this line item.

    NOTE:         The rent potential recorded on the rent schedule will be different from the budgeted rent
                  potential, if there are lease variances. Lease variances are not recorded on the rent schedule.
                  The budget notes should start with the rent potential recorded on the rent schedule and then
                  subtract the amount of the lease variance to arrive at the budgeted rent potential.


LINE 1a        NET CHANGE IN RECEIVABLES – Leave blank.

LINE 1b        NET CHANGE IN UNEARNED RENTAL INCOME – Leave blank.

TOTAL RENTAL INCOME - Add Lines 1a through 1e.



LINE 2         OTHER INCOME

This budget package allows budgeting of escrow reserves. Assess the projected physical needs of the
development to determine the projected needs for the next 12 months. This projection should take into
consideration the latest annual physical inspection and the age and life expectancy of the development's
buildings and components. Based on this assessment, determine which funding source to use. Then budget
the appropriate escrow based on your determination.


LINE 2a      REPLACEMENT RESERVE – Include the estimated Replacement Reserve funds that will be
disbursed during the year based on the projected physical needs of the development.

LINE 2b     DCE PRINCIPAL - Include the estimated DCE Principal funds that will be disbursed during the
year based on the list of projected physical needs of the development.

9/10                                                 17
LINE 2c        DCE INTEREST - DCE interest must be budgeted (if required) to offset a deficit budget. The
interest rate projection for 2011 is 6.00% .

Include the estimated DCE Interest funds that will be disbursed during the year for the projected physical needs
of the development.

LINE 2d        OPERATING RESERVE CASH - Include the estimated Operating Reserve Cash Escrow funds
that will be disbursed during the year based on the list of projected physical needs of the development.

LINE 2e       ADVANCES – Include any money advanced to the development (generally from owners) to fund
operating deficits or to support operating needs.

LINE 2f      MISCELLANEOUS SPECIAL ESCROWS - Include all funds received from special MSHDA-held
reserve accounts; i.e. exterior painting/staining, asphalt repairs, resale repair escrow, reimbursements from the
insurance escrow, etc.

LINE 2g       PERSONAL CARE RATE/AFC – Calculate this figure by including the Personal Care Rate for
2011 (this amount may be higher based on the 2011 COLA amount) times the number of ACC units times 12.
Subtract the amount of Annual Rent Potential from the 2011 Rent Schedule.

Only board and other services from SSI-SSA will be included in this line item.

NOTE: Do not include the cost of the resident’s rent in this line item. The cost of the resident’s rent i s
         included in Gross Rent Potential.


LINE 2h PROGRAM FUNDS - Include the amount of funds received from federal, state and community
agencies to fund resident programs and services , i.e. food stamps , human services program. Also include the
names of the program funding sources.


LINE 2i       EXCESS RENTAL INCOME (SEC. 236 DEVELOPMENTS ONLY) – Obtain this figure by
multiplying the surcharge amount found on the most recent Excess Income Report by 12. Include the amount
of excess income approved by HUD to be retained by the owner for limited purposes.


LINE 2j       OTHER - Include miscellaneous income; i.e. cable, donations, club house rental, non-refundable
pet or other fees, human services programs , sales proceeds, NSF fees, Section 236 Interest Reduction
Subsidy, rent from non-ACC’d units, NSF fees and rent from telecommunications tenants.

LINE 3        TOTAL INCOME - Add Total Rental Income plus Total Other Income.




9/10                                               18
       LIST OF MANAGEMENT AGENTS WITH MSHDA-APPROVED
                       PENSION PLANS

                                     August 2010

1st City
Affinity Property Management
AIMCO
Altman Management
Amurcon Management
Associated Management
Avon Hills Consumer Housing Cooperative
Central Michigan Non-Profit Housing
Centrum Management
Continental Management
Cremco
First Housing
Heritage Property Management
Huntington Management
Independent Management Services
KMG Prestige
Keystone Property Management
Lockwood Property Management
Lord’s Management Group
Management Resources Development
Management Systems
Medallion Management, Inc.
Michigan Capital Management
Midwest Management Company
National Church Residences
PK Housing & Management Company
PM Group Management
Premier Property Management
Presbyterian Villages of Michigan
Professional Property Management Company
Professional Property Services
Republic Management Corporation
TPM, Inc.
The Shoreline Corporation
Wingate Management Corporation – Boston
Wingate Management Corporation – Southfield




9/10                                      19
Insert Budget Form #450-MR (Exhibit C)
                                                                                                  EXHIBIT D

            Sample:    Copies of a completed version should be posted in three places.


                           NOTICE TO RESIDENTS OF INTENTION TO SUBMIT
                            A REQUEST TO MSHDA FOR APPROVAL OF AN
                             INCREASE IN MAXIMUM PERMISSIBLE RENTS

 Date of Notice (Prior to September 30)

 Take notice that on [date] we plan to submit a request for approval of an increase in the maximum permissible
 rents for [name of apartment complex] to the Michigan State Housing Development Authority [MSHDA]. The
 proposed increase is needed for the following reasons:

    1.

    2.

    3.

 The rent increases for which we have requested approval are:


                   Present              Proposed                Proposed             Present        Proposed
                    Rent                Increase                  Rent                Utility         Utility
                                                                                   Allowance       Allowance

Bedrooms      Basic      Market      Basic      Market       Basic      Market
                $          $           $          $            $          $              $               $




 MSHDA MGMT. 451
 6/01
                                                                                                      EXHIBIT D
                                                                                                        Page 2

A copy of the materials that we are submitting to MSHDA in support of our request will be available during normal
business hours at [address] for a period of 30 days from the date of service of this notice for inspection and
copying by residents of [name of apartment complex] and, if the residents wish, by legal or other representatives
acting for them individually or as a group.

During a period of 30 days from the date of service of this notice, residents of [name of apartment complex] may
submit written comments on the proposed rent increase to us at [address]. Resident representatives may assist
tenants in preparing those comments. If, at MSHDA's request or otherwise, we make any material change during
the comment period in the materials available for inspection and copying, we will notify the residents of the change
or changes, and the residents will have a period of 15 days from the date of service of this additional notice (or the
remainder of any applicable comment period, if longer) in which to inspect and copy the materials as changed and
to submit comments on the proposed rent increase. These comments will be transmitted to MSHDA, along with
our evaluation of them and our request for the increase. You may also send a copy of your comments directly to
MSHDA at the following address: Michigan State Housing Development Authority [address of MSHDA office in
Lansing or Detroit], Attention: [Assigned AM].

MSHDA will approve, adjust upward or downward, or disapprove the proposed rent increase upon reviewing the
request and comments. When MSHDA advises us in writing of its decision on our request, you will be notified. If
the request is approved, any allowable increase will be put into effect only after a period of at least 30 days from
the date you are served with that notice and in accordance with the terms of existing leases.
                                                                                                  EXHIBIT E


                   MICHIGAN DEPARTMENT OF LABOR & ECONOMIC GROWTH

                      MICHIGAN STATE HOUSING DEVELOPMENT AUTHORITY
                            735 E. Michigan Avenue, P.O. Box 30044
                                    Lansing, Michigan 48909

                                 IDENTITY OF INTEREST DISCLOSURE


DEVELOPMENT NAME:____________________________________ MSHDA #:
___*NO, We are not using and do not intend to use an Identity of Interest vendor as defined by the
Authority's General Rules. If at anytime in the future we contract to do business with an Identity of Interest
vendor, an Identity of Interest Disclosure will be submitted to the Authority for prior approval.

OWNER:                                                    AGENT:

BY:                                                       BY:

ITS:                                                      ITS:

DATE:                                                     DATE:

*Sign and return only page l of this form to the Authority.

___YES, an identity of interest, as defined by the Authority's General Rules, exists at th e
above-captioned development. During the budget year _________ until _________, the following
contractor/supplier will be used: (complete entire form.)

VENDOR NAME:
                        (Submit a separate form for each Identity of Interest vendor)


DETAILED DESCRIPTION OF GOODS AND SERVICES TO BE PROVIDED:




CONTRACT AMOUNT:



VENDOR DISCLOSURES (Complete applicable category):
                                                                         EXHIBIT E Page 2

SOLE PROPRIETORSHIP--List of All Owners or Managers of the Vendor:



COPARTNERSHIPS OR LIMITED PARTNERSHIPS--List of all Copartners or General Partners of the
Vendor:



JOINT VENTURES--List of all joint venturers of the Vendor:


CORPORATIONS--List of all directors, officers and shareholders of the Vendor:




List of all individuals involved with owner and/or agent with whom there is an Identity of Interest and a
complete description of the Identity of Interest:

                                                                Description of Identity
        List of Individuals                                        of Interest________




FEDERAL TAX I.D. # OF THE VENDOR:


LOCATION(S) OF THE VENDOR'S OFFICE:

LIST ALL MONTHLY INCOME & EXPENDITURE REPORT LINE ITEM NUMBERS WHERE THESE
EXPENDITURES WILL BE SHOWN:
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
       _____________________________
                                                                                         EXHIBIT E Page 3

ATTACHMENTS--The following items should be attached to this Disclosure:

       A copy of the contractor/suppliers organizational documents.

       At least three (3) bids for contracted goods and services to be provided by the Identity of Interest
        vendor.


The Owner and the Management Agent understand that Authority staff has the right at any time to audit
the books of the contractor/supplier. THE IDENTITY OF INTEREST VENDOR WILL NOT BE USED
UNTIL THE PROPOSED VENDOR AND CONTRACT AMOUNT HAVE BEEN APPROVED BY THE
AUTHORITY.


If goods or services not listed above will be purchased from the Identity of Interest vendor or if the
contract price increases beyond the prices previously approved by the Authority, a new Disclosure will be
submitted to the Authority for prior approval.

I/We certify that I/we have read the Michigan State Housing Development Authority Rules regarding the
use of Identity of Interest Vendors and agree to abide by the terms and conditions required by this rule.


SIGNATURES:

OWNER:                                   AGENT:

BY:                                      BY:

ITS:                                     ITS:

DATE:                                    DATE:


VENDOR:_________________________ DATE:


MSHDA APPROVAL:


______________________________________________                           _________________
  DIRECTOR, OFFICE OF ASSET MANAGEMENT                                   DATE


MSHDA MGT. 458
8/05
                                                                                             EXHIBIT E Page 4



         PART 10.        IDENTITY OF INTEREST WITH VENDORS TO AUTHORITY-FINANCED
                                       DEVELOPMENTS

R 125.201 Applicability
        Rule 201. The rules contained in this part shall apply to all transactions that involve the supply of
goods and services to authority-financed housing developments between the owners or the management
agents of the developments and vendors who supply goods or services to those developments.

R 125.202 Identity of interest; "member of the family" defined.
          Rule 202. (1) Any contractual relationship between either an owner or management agent and a
vendor described in subrule (2) of this rule shall constitute an identity of interest.
          (2) An identity of interest shall exist if any of the following conditions occurs:
          (a) Either the owner or management agent, or any officer, director, stockholder, partner, or joint
venturer or either the owner or management agent, has a financial interest in the vendor.
          (b) Either the owner or management agent, or any officer, director, stockholder, partner, or joint
venturer of either the owner or management agent, is also an officer, director, stockholder, partner, or joint
venturer of the vendor.
          (c) Either the owner or management agent, or any officer, director, stockholder, partner, or joint
venturer of either the owner or management agent, is also the vendor.
          (d) A member of the family of either the owner or management agent, or of any officer, director,
stockholder, partner, or joint venturer of either the owner or management agent, is the vendor or an officer,
director, stockholder, partner, or joint venturer of the vendor or has a financial interest in the vendor. For
purposes of this part, "member of the family" means any person who is related to the party in question by
blood, marriage, or operation of law.

R 125.203 Requirements for conducting business with identity of interest vendors.
         Rule 203. Owners and management agents shall conform to all of the following requirements when
conducting business with vendors with whom there is an identity of interes t:
         (a) Both the owner and management agent shall inform the authority division of management and
reinvestment of any proposed vendor with whom there is an identity of interest. Such notification shall be
submitted concurrent with submission of the development operating budget, but at least once per year.
         (b) The owner and management agent shall submit a certified disclosure for each proposed vendor
with whom there is an identity of interest which lists the names of all of the following persons:
         (i) All owners and managers of vendors that are sole proprietorships.
         (ii) All copartners or general partners of vendors that are copartnerships or limited partnerships.
         (iii) All joint venturers of vendors that are joint ventures.
         (iv) All directors, officers, and shareholders of vendors that are corporations.
         (c) The certified disclosure shall list, for each person described in subdivision (b) of this rule the
names of the individuals involved with the owner or management agent with whom
                                                                                                 EXHIBIT E Page 5



there is an identity of interest and the extent or degree of such identity of interest. The certified disclosure
shall also contain other information as the authority shall require, such as the following:
          (i) Federal tax identification number of all vendors with whom there is identity of interest.
          (ii) The location of all offices that contain business records of the vendors with whom there is an
identity of interest.
          (iii) The names and addresses of the bookkeepers and accountants of the vendors with whom there
is an identity of interest.
          (d) The certified disclosure shall be submitted on such form as shall be designated by the authority
and shall be submitted together with the submission described in subdivision (a) of this rule, or if the propo sed
vendor is not listed on such submission, at the time the owner or management agent requests approval to
contract with a proposed vendor with whom there is an identity of interest.
          (e) The owner and management agent shall submit, together with its cert ified disclosure, a copy of
the organizational documents for each proposed vendor with whom an identity of interest is shared.
          (f) The authority shall have the right to audit the books of the vendor with whom there is an identity of
interest to determine whether amounts paid to identity of interest vendors were reasonable and whether there
has been compliance with applicable restrictions on return. The owner, management agent, and proposed
vendor shall acknowledge the authority's right to conduct such an audit in the certified disclosure.
          (g) Both the owner and management agent shall submit, to the authority, a request for approval to
use a proposed vendor with whom there is an identity of interest. Neither the owner nor management agent
shall contract for goods or services from any vendor with whom there is an identity of interest until the
proposed vendor and contract amount is approved by the Authority. If an owner or management agent enters
a contract for goods or services beyond the goods or services previously approved by the authority, or if the
contract price increases beyond the prices previously approved by the authority, then an additional approval
shall be obtained.
          (h) The authority may, upon a request from the owner or management agent and after review of the
disclosure required pursuant to the provisions of subdivisions (b) to (f) of this rule, determine that the identity of
interest between the owner and agent is insignificant. If such a determination is made, the owner and
management agent need not comply with the provisions of subdivision (i) of this rule.
          (i) Unless compliance with this subdivision is excused pursuant to the provisions of subdivision (h) of
this rule, all requests for approval of proposed vendors shall be accompanied by a detailed explanation of the
goods or services to be provided by the proposed vendor and not less than 3 bids for such goods and
services. The 3 bids shall include a bid from the vendor with whom there is an identity of interest.
          (j) Requests for approval of a proposed vendor shall be submitted concurrent with the submission of
the development operating budget and any other time that the owner or management agent wishes to contract
with a vendor with whom there is an identity of interest. However, a proposed vendor and contract amount
need be approved only one time per operating year per development, unless the vendor supplies goods or
services beyond the
                                                                                                EXHIBIT E Page 6



goods or services previously approved by the authority or the cont ract price increases beyond the prices
previously approved by the authority.

R 125.204 Sanctions; "excessive costs" defined.
          Rule 204. (1) If an owner or management agent is found to be in violation of these rules concerning
identity of interest, the authority, or the officers or employees to whom it shall delegate authority, may impose
the following sanctions in addition to any other remedies available through contractual documents or at law or
equity:

          (a) On the first occurrence of a violation, either or both of the following sanctions may be imposed:
          (i) The owner or management agent may be required to reimburse the development operating account
for all excessive costs, as determined by the authority, incurred as a result of the contract with the vendor with
whom there is an identity of interest.
          (ii) The owner and management agent found to be in violation may be prohibited from using any
vendor with whom there is an identity of interest for a period of 1 year.
          (b) For each violation after the first, the following sanctions may be imposed, as applicable:
          (i) The owner or management agent may be required to reimburse the development operating account
for all excessive costs, as determined by the authority, incurred as a result of the contract with the vendor with
whom there is an identity of interest.
          (ii) If the violation involves a vendor who has an identity of interest with the management agent, then
either or both of the following sanctions may be imposed:
          (A) The management agent's management agreement may be terminated and a new management
agent shall be hired.
          (B) The vendor who shares the identity of interest with the management agent may be barred from
doing business with other authority-financed developments managed by the same management agent.
          (iii) If the violation involves a vendor who has an identity of interest with the owner, then the owner and
its management agent may be prohibited from doing business with the particular vendor at the development in
question for a period of 5 years.
          (2) As used in this rule, the term "excessive costs" means all costs which would not have been
incurred by the development if the owner or management agent, or both, had exercised reasonable business
judgment and obtained only those goods and services reasonably necessary for operation of the development
at competitive prices.
                                                                                 EXHIBIT F


http://www.hudclips.org/sub_nonhud/html/pdfforms/92547-a.pdf

Budget Worksheet HUD-92547-A (Replaces Statement of Profit and Loss HUD-92410)
                                                                                                           EXHIBIT G

                                     OWNER CERTIFICATION TO MSHDA
                                      OF PURCHASING PRACTICES AND
                                     REASONABLENESS OF EXPENSES

        MSHDA #:       DEVELOPMENT NAME:
        HUD PROJECT #:
        LOCATION:

Acting on behalf of,                                       , the Project Owner, I certify that ALL of the following
statements are true.

1.   The project is obtaining utilities at the lowest rates available.
2.   The project has received or requested any tax relief for which it is eligible and management has analyzed
     the project's property tax bills and appealed any assessments which appeared unreasonable.
3.   Amounts paid to individuals or companies having an identity-of-interest with the owner or the management
     agent were not in excess of the costs that would have been incurred in making arms -length purchases on
     the open market.
4.   Management has exerted reasonable effort to take advantage of discounts and has credited the project
     with all discounts, rebates or commissions received with respect to purchases, service contracts and
     other transactions made on behalf of the project.
5.   Management has obtained contracts, materials, supplies and services, including the preparation of the
     annual audit, on terms most advantageous to the project and at costs not in excess of amounts ordinarily
     paid for comparable contracts, materials, supplies and services in the area in which such services,
     supplies, or materials are furnished.
6.   Management has solicited verbal or written cost estimates, as necessary to comply with the Paragraphs 3
     through 5 above. Management has documented the reasons for accepting other than the lowest bid and
     will make the documentation available to MSHDA, upon request.

WARNING:

$    18 U.S.C. 1001 provides, among other things, that whoever knowingly and willingly makes or uses a
     document or writing containing any false, fictitious, or fraudulent statement or entry, in any matter within
     the jurisdiction of any department or agency of the United States, shall be fined not m ore than $10,000 or
     imprisoned for not more than 5 years, or both.

$    12 U.S.C. 1715z-4 provides in part: "Whoever, as an owner of a property which is security for a mortgage
     (covering multifamily housing, as defined in the regulations of the Secretary) or as a stockholder beneficial
     owner ... trust ... or as an officer, director or agent of any such owner (1) willfully uses or authorizes use of
     any part of the rents or other funds derived from the property covered by such mortgage in violation of a
     regulation ... (2) willfully and knowingly uses or authorizes the use, while such mortgage is in default, or
     any part of the rents or expense ... shall be fined not more than $5,000 or imprisoned not more than 3
     years or both.

Signed by:


Name                                                          Title


Signature                                                     Date

MSHDA MGMT. 459
6/01
Insert Rent Schedules (H-1, H-2 & H-3)

								
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